Indian funds as good as foreign peers, need scale: UTI Mutual Fund

Debunking the popular belief that domestic funds follow foreign investors in picking stocks, top fund house UTI Mutual Fund's chief Leo Puri has said Indian fund managers have been very successful but they need size and scale to start driving the markets.

Stating that Indian mutual fund industry has potential to grow as much as 100 times of its current size of about Rs 13 lakh crore, Puri said, "Indian fund managers are not very large, but they have been quite successful stock pickers." "This is true not just of UTI and I would say many of our colleagues in the industry have shown that you can build very high quality investment processes within Indian institutions," Puri told PTI in an interview.

Giving example of UTI Mutual Fund, he said, "We feel very confident that we have very high quality investment processes, which is research-based and has been able to identify value creating opportunities better than many foreign investors.

"Our relative performance is reasonably good and the challenge we have is that of scale. What Indian institutions are not able to do is create momentum or provide resilience." On the popular belief that Indian funds tend to follow investment decisions taken by foreign institutional investors, Puri said, "The sense that we are followers is on flows that we end up having to follow. In terms of our investment processes and our stock-picking approach, I think we stand apart and in many cases we are even superior." Puri, a dual Masters degree holder from Oxford and Cambridge University of the UK, admitted that "unfortunately it is true that we end up following in terms of flows." "That is why we need to build. We are a very very puny industry. We need to be 100 times of our size," he said.

Puri, who has been heading UTI Mutual Fund for about two years now, was earlier Managing Director at global private equity giant Warburg Pincus. He has previously also worked as Director and Senior Advisor with McKinsey.

On how Indian fund managers can reach such a scale, Puri said that will depend on the country's retail investors, households and pension flows.

"I think we are poised to grow at a rate where the industry will double every three years.

"Every 3-4 years we can aim to double, so that in 10-15 years we would be substantially large industry. That certainly looks quite feasible. It may grow even faster than that.

"Retirement funds can make it quite non-linear. Even in the US, that is what turbo-charged the market," he said.

Stating that the personal wealth and disposable income were already on an upside, Puri said, "Today we are very small and we are poised to become substantially big over the next decade. We need to create right foundations, right regulations, right governance."

"We need to think about it as we have been thinking about banks, and not regard mutual funds as a small part of the financial system.

"The capital markets would be a much stronger mechanism for capital generation than the banks and that would make our economy a matured one in true sense," he added.